Elhulu v. Alshalabi

2021 NCBC 28

MARWAN ELHULU; KHALID ALNABULSI; and MOHAMMED SAQQA, Plaintiffs, v. FADEL ALSHALABI; OMNI HOLDING GROUP, LLC; and CRESTAR LABS, LLC, Defendants.

No. 20 CVS 12827

Superior Court of North Carolina, Mecklenburg

April 29, 2021

The Law Office of William L. Sitton, Jr., by William L. Sitton Jr., for Plaintiffs Marwan Elhulu, Khalid Alnabulsi, and Mohammed Saqqa.

Parry Law, PLLC, by Jonah A. Garson and K. Alan Parry, for Defendants Fadel Alshalabi and Crestar Labs, LLC.

Jerry Meek, PLLC, by Gerald F. Meek, for Defendant Omni Holding Group, LLC.

ORDER AND OPINION ON DEFENDANTS' MOTIONS TO DISMISS

Adam M. Conrad Special Superior Court Judge

1. This Order and Opinion addresses two motions to dismiss filed by the defendants in this action. For the following reasons, the Court GRANTS in part and DENIES in part each motion.

I. BACKGROUND

2. The following background assumes that the allegations of the complaint are true.

3. Marwan Elhulu, Khalid Alnabulsi, and Mohammed Saqqa (together, "Plaintiffs") claim that they were duped by Fadel Alshalabi to invest in his medical laboratory business. In 2016, Alshalabi began pitching them a plan to expand his business through a company called Omni Holding Group, LLC ("Omni"). (See Compl. ¶ 14, ECF No. 3.) Alshalabi allegedly made a host of promises including that their "short-term" investments in Omni would earn substantial returns. (Compl. ¶¶ 15, 18, 19.) For example, at a meeting in January 2016, Alshalabi offered Plaintiffs and others the opportunity to invest in Omni at $80, 000 per share. (Compl. ¶ 15(a).) He assured Plaintiffs that their entire investment would be repaid by the end of the year and, moreover, that they would begin receiving distributions^[1] of $15, 000 per share within six months. (See Compl. ¶ 15(b), (c).) Two months later, Alshalabi promised that, for an additional $20, 000 per share, Plaintiffs could also acquire an interest in two other laboratory companies, Crestar Labs, LLC ("Crestar") and Clio Laboratory, LLC ("Clio"). (See Compl. ¶ 15(d), (e).) According to Plaintiffs, Alshalabi told them "that the risk of loss was basically nonexistent and, at worst, no more than five percent." (Compl. ¶ 15(f).)

4. So Plaintiffs invested. Elhulu invested $500, 000, and Alnabulsi and Saqqa each invested $200, 000. (See Compl. ¶ 16.) Their investments were supposed to procure not only membership in Omni but also an interest in Crestar. (See Compl. ¶¶ 15(e), 17.) All told, Alshalabi allegedly raised $8.8 million from Plaintiffs and others that year. (Compl. ¶ 32.) He then allegedly promised Plaintiffs that they would receive a distribution by the end of the year and that their investments would be repaid in full by early 2017. (Compl. ¶ 18.)

5. According to the complaint, Alshalabi failed to live up to his promises. To date, Plaintiffs have received only two distributions: one in April 2017 and another in January 2018. (Compl. ¶ 19.) They have not received the full repayment of their initial investments, let alone the regular returns they expected. (See Compl. ¶¶ 19, 26, 33, 36-38.)

6. Since investing, Plaintiffs have asked many times for documentation to show how their funds have been used and to clarify their interests in the various entities at play. (See Compl. ¶ 25.) But these requests were met with delays, vague assurances, and then ultimately silence. At first, Alshalabi convened meetings with Plaintiffs and other investors, promising that distributions and repayments were imminent. (See, e.g., Compl. ¶¶ 26, 36, Ex. 4.) At one point, he told them that he had used some of the funds to invest in Clio, but then he backtracked and said that they no longer had any ownership interest in that company. (See Compl. ¶¶ 27, 30.) By mid-2018, Alshalabi stopped meeting and communicating with Plaintiffs. (Compl. ¶ 35.)

7. Plaintiffs state that they have made "repeated attempts" to account for their investments. (Compl. ¶ 34.) Eventually, they obtained legal counsel and made a written demand on Alshalabi for financial statements and other documents for each entity in which they might own an interest. (See Compl. ¶¶ 10, 31, Ex. 1.) Alshalabi, Omni, and Crestar ignored the request. (Compl. ¶ 31.)

8. Now, Plaintiffs have brought this suit against Alshalabi, Omni, and Crestar (together, "Defendants"). They seek a declaratory judgment to ascertain the extent of their interests in Omni, Crestar, and Clio; to declare the validity of a document that may be Omni's operating agreement; and to ascertain what Defendants did with Plaintiffs' funds and whether Alshalabi has personally profited from them. (See Compl. ¶¶ 44-49, Prayer for Relief.) They have also brought claims for accounting, breach of contract, unfair or deceptive trade practices, and breach of fiduciary duty. (Compl. ¶¶ 50-77.)

9. Omni has filed a motion to dismiss, (ECF No. 9), and Alshalabi and Crestar have filed a joint motion to dismiss, (ECF No. 11). The motions have been fully briefed, and the Court held a hearing on 4 March 2020. The motions are now ripe for resolution.

II. LEGAL STANDARD

10. Defendants have moved to dismiss the complaint pursuant to Rules 12(b)(1), 12(b)(6), and 12(b)(7) of the North Carolina Rules of Civil Procedure.

11. Rule 12(b)(1) permits dismissal for lack of subject matter jurisdiction. Subject matter jurisdiction is the "indispensable foundation upon which valid judicial decisions rest, and in its absence a court has no power to act." In re T.R.P., 360 N.C. 588, 590 (2006). Lack of subject matter jurisdiction necessitates dismissal at any stage of litigation. See N.C. R. Civ. P. 12(b)(1), 12(h)(3); Azure Dolphin, LLC v. Barton, 2017 NCBC LEXIS 90, at *13 (N.C. Super. Ct. Oct. 2, 2017), aff'd, 371 N.C. 579 (2018). When assessing its jurisdiction, the Court "may consider matters outside the pleadings." Harris v. Matthews, 361 N.C. 265, 271 (2007) (citations omitted).

12. Other issues before the Court are raised under Rule 12(b)(6) for failure to state a claim. A Rule 12(b)(6) motion "tests the legal sufficiency of the complaint." Isenhour v. Hutto, 350 N.C. 601, 604 (1999) (citation and quotation marks omitted). The motion should be granted only when "(1) the complaint on its face reveals that no law supports the plaintiff's claim; (2) the complaint on its face reveals the absence of facts sufficient to make a good claim; or (3) the complaint discloses some fact that necessarily defeats the plaintiff's claim." Corwin v. Brit. Am. Tobacco PLC, 371 N.C. 605, 615 (2018) (citation and quotation marks omitted).

13. In deciding a Rule 12(b)(6) motion, the Court must treat the well-pleaded allegations of the complaint as true and view the facts and permissible inferences in the light most favorable to the nonmoving party. See Sykes v. Health Network Sols., Inc., 372 N.C. 326, 332 (2019); CommScope Credit Union v. Butler & Burke, LLP, 369 N.C. 48, 51 (2016). But the Court need not accept as true any "conclusions of law or unwarranted deductions of fact." Wray v. City of Greensboro, 370 N.C. 41, 46 (2017) (citations and quotation marks omitted). The Court also may consider documents "attached to and incorporated within [the] complaint" but may not consider matters outside the complaint. Bucci v. Burns, 2018 NCBC LEXIS 37, at *8 (N.C. Super. Ct. Apr. 25, 2018) (citation and quotation marks omitted).

14. Finally, Rule 12(b)(7) permits dismissal for failure to join a necessary party. "Necessary parties must be joined in an action. . . . A necessary party is one who is so vitally interested in the controversy that a valid judgment cannot be rendered in the action completely and finally determining the controversy without his presence." Karner v. Roy White Flowers, Inc., 351 N.C. 433, 438-39 (2000) (citations and quotation marks omitted); see also N.C. R. Civ. P. 19(a); Long v. City of Charlotte, 306 N.C. 187, 212 (1982). But dismissal under Rule 12(b)(7) is proper only when the necessary party cannot be joined. See State ex rel. Regan v. WASCO, LLC, 269 N.C.App. 292, 305 (2020), review denied, 374 N.C. 744, 2020 N.C. LEXIS 774. If a necessary party has not been joined but can be joined, the Court must order the party "summoned to appear in the action." Id. (quoting N.C. R. Civ. P. 19(b)); see also N.C. R. Civ. P. 21; Long, 306 N.C. at 212-13.

III. ANALYSIS

15. Defendants have moved to dismiss all claims on various bases. Several arguments require no analysis. In their opposition briefs, Plaintiffs do not contest the dismissal of their claim for breach of fiduciary duty against Omni and their claims for breach of contract, unfair or deceptive trade practices, and breach of fiduciary duty against Crestar. The Court therefore dismisses these claims without prejudice.

16. One other prefatory matter deserves mention. At times, the briefs on both sides exhibit confusion about the nature and scope of several claims, partly due to Plaintiffs' candid uncertainty about some matters. (See, e.g., Omni Br. in Supp. 3, 7, 11-12, 16, ECF No. 10; Opp'n to Omni MTD 4-6, 8-11, ECF No. 18; Omni Reply Br. 4-6, ECF No. 24; Alshalabi & Crestar Br. in Supp. 5-6, ECF No. 12; Opp'n to Alshalabi & Crestar MTD 3-4, 7, ECF No. 19.) The Court has done its best to understand the arguments and allegations at issue and to construe the complaint liberally without expanding Plaintiffs' claims "beyond what is fairly alleged." VanFleet v. City of Hickory, 2020 NCBC LEXIS 40, at *8 (N.C. Super. Ct. Mar. 30, 2020).

A. Declaratory Judgment

17. The Declaratory Judgment Act broadly authorizes courts "to declare rights, status, and other legal relations, whether or not further relief is or could be claimed." N.C. G.S § 1-253. A motion to dismiss a claim for declaratory judgment "is seldom . . . appropriate . . . and will not be...